Semicon 2.0 Bets on Domestic Semiconductor Equipment and Specialty Materials

Semicon 2.0 Machines and Materials Pillar: India Targets the Upstream Semiconductor Supply Chain

India's Semicon 2.0 programme devotes an entire structural pillar to semiconductor equipment and specialty materials, a segment that India has almost entirely ignored in its previous industrial policy cycles. This upstream layer of the semiconductor supply chain, encompassing everything from lithography machines and chemical vapour deposition tools to ultra-high purity hydrofluoric acid and silicon carbide substrates, is currently dominated by companies from Japan, the United States, Germany, and the Netherlands. India's complete dependence on this concentrated global supply chain for any future domestic fabrication capacity represents a strategic vulnerability that Semicon 2.0's machines and materials pillar is explicitly designed to address.

Why Semiconductor Equipment Matters

A modern semiconductor fab requires hundreds of distinct pieces of specialised manufacturing equipment, from photolithography scanners and ion implanters to atomic layer deposition systems and chemical mechanical polishers. Each tool category is typically served by a small number of global suppliers, creating extreme concentration risk in the semiconductor supply chain. The global chip shortage of 2020 to 2023 exposed this vulnerability when equipment delivery lead times stretched to two years and beyond, bottlenecking fab capacity expansions worldwide. India's ambition to build domestic fabs without also building domestic equipment capability would simply transfer the dependency from chip imports to equipment imports, leaving the country exposed to the same supply chain risks it is trying to escape.

Focus Areas Under the Machines and Materials Pillar

Semicon 2.0's machines and materials pillar targets several specific areas for domestic capability development. In equipment, the programme is supporting R&D and pilot-scale manufacturing for metrology and inspection tools, which are less capital-intensive than lithography systems and represent a more accessible entry point for Indian engineering companies. In materials, the pillar provides incentives for production of silicon carbide substrates and boules for power semiconductor applications, high-purity silicon precursor gases, specialty photoresists and developer chemicals, and copper and tungsten targets for physical vapour deposition. These materials are consumed in large volumes by any operating fab and represent a commercially viable domestic manufacturing opportunity that aligns with India's established strength in chemical engineering and process industries.

Global Partnerships and Technology Transfer

Developing domestic semiconductor equipment capability from scratch requires technology access that India cannot generate independently on relevant timescales. Semicon 2.0 includes provisions for joint ventures and technology licensing agreements between Indian companies and global equipment and materials vendors, with the government offering capital subsidies and guaranteed domestic procurement preferences as inducements for technology transfer partners. Several Japanese equipment companies including TEL, Advantest, and Hitachi High-Tech have indicated interest in establishing India manufacturing or assembly presences in the context of SEMICON India 2026, aligning with Japan's own strategic interest in diversifying its semiconductor supply chain production away from East Asia concentration.

Long-Term Vision for Self-Sufficiency

India's target for the machines and materials pillar is not to replicate the entire global semiconductor equipment supply chain domestically but to develop meaningful self-sufficiency in a defined subset of high-value categories while building the engineering talent and manufacturing base that could expand over time. The initial focus on metrology, materials, and pilot-line equipment aligns with India's existing capabilities in precision engineering, chemical manufacturing, and scientific instrumentation. Success in this pillar would create the foundation for India to eventually participate in the global semiconductor equipment market as a supplier, not just as a consumer, adding a new dimension to India's semiconductor value proposition beyond chip design and packaging.